In this article, you will learn why was Twitter sold. Elon Musk bought Twitter for forty-four billion dollars. Musk, the CEO of Tesla and the richest man on earth, plans to take the social-media company private, and has said that he wants Twitter to adhere more closely to the principles of free speech.
Why Was Twitter Sold?
Elon Musk bought 100 percent of Twitter's stake. The billionaire has been showing added interest in the microblogging website as he believes he can unlock Twitter to its full potential as a platform for free speech. While Musk has his plans, one might wonder why the Twitter Board decided to sell the company to Musk. If one looks closely, it seems that in this case, it is apt to paraphrase some words from the movie Godfather: He made an offer Twitter Board “couldn't refuse.”
In other words, it was a seriously good offer. Someone emotionally attached to the company, say Jack Dorsey, with a supportive board, could have fended it off. But Twitter's Board, or even its CEO Parag Agrawal, seemingly didn't look at Twitter in emotional terms. They looked at it in business terms and in business terms, once it was clear that Musk was serious about his offer and had ready money to pay, it made a lot of sense to accept $44 billion.
What are the Reasons for Selling Twitter?
There are two reasons for that.
One is that $44 billion is indeed a good price for Twitter. It is significantly more than around $28 billion that Microsoft paid for LinkedIn, and LinkedIn had a viable business model. It is also much much more than what Facebook paid for Instagram or WhatsApp.
Musk offered to buy a 100 per cent stake in Twitter for $44 billion or $54.20 per share. This is much higher than the current market cap of about $39 billion. And this $39 billion is actually on the higher side of Twitter's market cap when seen in the context of its business performance in the last five years.
So, when Musk offered to pay $54.20 per share for Twitter, it was likely seen as a good exit option by Twitter management.
The second reason seems to be the future of Twitter and what Musk could have done to it if Twitter decided to fight off the hostile takeover.
Musk, in his offer letter to Twitter Chairman Bret Taylor on April 14. said that he would need to reconsider his position as a shareholder if the board chose to decline his offer. In other words, Musk straight up threatened that he would be selling his Twitter stock if his bid to acquire the company fails.
Now, Musk at that time owned a little over 9 per cent of the Twitter stock. Selling this much stock would have resulted in Twitter's share price taking a beating in the open market. It is safe to assume that Twitter would have lost a lot of market cap in that case and its value would have gone down even further.
This article explains about why was Twitter sold.
